India’s Roadmap to Global Growth: Cha...
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India’s Roadmap to Global Growth: Challenges and Imperatives
Mr. Sridhar Narayanan

Sridhar Narayanan is an Associate Professor of Marketing at the Graduate School of Business at Stanford University. He obtained his PhD from the University of Chicago, an MBA from the Faculty of Management Studies, Delhi and his Bachelors degree in Electrical Engineering from Delhi College of Engineering. His research in terests primarily lie in the quantitative study of consumer behavior, and he has studied domains such as online advertising, pharmaceutical marketing and social influences in product adoption behavior. He has taught MBA-level courses on Marketing Strategy, Marketing Analytics and Green Marketing, besides advanced PhD-level courses on quantitative methods in Marketing and in Executive Education programs in the US, Africa and India. He lives in Palo Alto, California with his wife and two young daughters.

After over two and a half centuries in which India’s contribution to the World’s GDP saw a precipitous decline, India is poised on the verge of reclaiming its place as one of the leaders of the world. Since the liberalization of the country’s economy in the 1980s, and its acceleration since the early 1990s, the potential of India has been recognized and has been much talked about. The slide has been arrested, and India’s share of World GDP has steadily and continuously increased for about 25 years now. Yet, while China, with just under 20% of the World’s population now accounts for about 17.5% of its GDP, India accounts for only about 7% of the World’s GDP with about 18% of its population. Is the Indian economy poised to be a leader of the world? What are the opportunities and what are the potential pitfalls along this path?


The first reason to be optimistic about India’s prospects is demographic. Close to half of India’s population is in the productive age group, with the aged accounting for less than 6% of the country’s population. 18% of the population is on the verge of entering the productive age range of 25 years and above. It is generally recognized that a young population, productively employed, can propel dramatic increase in output of a country. The United States benefited from its baby boom, and China dramatically lifted almost its entire population out of poverty starting in the 1980s, benefiting from its own demographic dividend. But in order to make the best of this demographic bonanza that India currently has, it needs to employ this young and aspirational population productively.


This brings us to the first challenge facing India if it is to generate sustained growth over the next few decades. This is of ensuring that there is a healthy, skilled population that can be productively employed. Despite some impressive strides in the recent front on ensuring a literate population, there are some significant gaps on this front. Through programs such as the Sarva Shiksha Abhiyaan and the mid-day meal scheme, the country has ensured that most of its children attend primary school. There has been an increased emphasis in many states to ensure that girls go through primary education as well. However, there are significant gaps in educational attainment, particularly after the primary stage. Besides that fact that a large number of children drop out after the primary stage, there is a significant increase in the gender gap in the post-primary stage, with more girls dropping out of school than boys. The focus of literacy programs thus needs to shift beyond primary enrollment towards ensuring that all our children stay in school until the age of 14. Beyond enrollment, the big challenge that India has to overcome in the coming few years is to upgrade the quality of its educational


An important factor in ensuring that the country experiences sustained growth over the next few decades is to increase the productivity of its economy. The Chinese economy saw rapid growth in the initial few years after its liberalization starting in the late 1970s through a dramatic improvement in productivity. While India has seen impressive increases in productivity of labour and capital in the years since its own economy was liberalized in the early 1990s, there is tremendous scope for improvement on this front. The growth in productivity of India’s labour and capital remain at about a half to two-thirds that of China, despite starting from a lower base. A variety of factors account for this difference, including the different levels of educational attainment and skill distribution in the two countries, and the infrastructure and governance deficits that the Indian economy faces. Addressing these deficits is necessary for generating the increases in productivity that will generate rapid and
sustained growth in India’s economy.

A third challenge, but also an opportunity facing India is that of managing growth along with the environment. Environmental issues are already very visible in the big cities of India, and they impose significant costs on the growth of the economy through their effects on the health of the population. The effects include premature mortality, as well as lost man-hours due to sickness. A recent World Bank study, for instance estimated the direct and indirect costs of pollution to be about 6% of its GDP every year. Human history has shown that a rapidly growing economy will involve industrialization and urbanization. Providing for shelter, clean air and water and energy for this population will pose significant challenges for the growing Indian economy. However, this also provides an opportunity for India, provided it invests in developing technologies and practices in this area. The issues that India on this front are not unique to the country. The solutions developed in India will find markets not just in India, but also around the world.

This list of the challenges and opportunities faced by India in its quest for growth is not meant to be exhaustive. However, these important issues have one point in common. Addressing these challenges require investment in human capital, particularly in managerial capital. An institution such as the Faculty of Management Studies has in its illustrious history taken a leadership role in this regard, with its unique focus on education of business professionals as well as professionals in areas as public services management and health care administration. By tailoring its programs towards the imperatives of the future, FMS can continue to play a stellar role in taking India towards its destined path of
global leadership.